Elasticity-Part Three

If the cross­price elasticity of demand between two goods is positive, the goods are likely to be complements.

• True

• False

If the price elasticity of supply for blue jeans is 1.3, an increase in the price of blue jeans of 10 percent would increase the quantity supplied of blue jeans by 13 percent.

• True

• False

If the income elasticity of demand for a good is negative, it must be

• an elastic good

• an inferior good

• a normal good

• a luxury good

If a supply curve for a good is price elastic, then

• the quantity supplied is sensitive to changes in the price of that good.

• the quantity demanded is insensitive to changes in the price of that good.

• the quantity demanded is sensitive to changes in the price of that good.

• the quantity supplied is insensitive to changes in the price of that good.

If the demand for a good is price inelastic, an increase in its price will increase total revenue in that market.

• True

• False

Price elasticity of supply is the responsiveness of

• demand to a change in price.

• price to a change in supply.

• quantity supplied to a change in price.

• price to a change in supply.

If the supply curve of a product is vertical, price elasticity of supply is equal to

• 0.

• 1.

• -1.

• infinity.

Suppose a decrease in demand causes the price to decrease from $4 to $3 and the quantity to decrease from 1,000 to 700. Then, at the midpoint between these two prices, the elasticity of supply equals

• 0.81

• 2.83

• 0.18

• 1.24

Supply is more price elastic if more time is available as the firms can adjust the supply when price is increasing.

• True

• False

Income elasticity can be measured by

• comparing the percentage change in demanded with the percentage change in income

• comparing the percentage change in quantity demanded with the percentage change in price

• comparing the percentage change in quantity demanded with the percentage change in income

• comparing the percentage change in quantity supply with the percentage change in income